Arbitration Agreement Template
If a dispute arises, parties can agree to alternative means of resolving present or future disputes without court litigation. Such conflict resolution methods are called alternative dispute resolution (ADR). The most common types of ADR include arbitration, conciliation, mediation, and negotiation.
This article will focus on arbitration as an alternative mechanism for dispute resolution and provide:
- A comprehensive definition of arbitration;
- A description of an arbitration agreement, including examples of arbitration agreements;
- Pros and cons of arbitration;
- How to write an arbitration agreement; and
- Frequently asked questions about arbitration.
What Is Arbitration?
Arbitration is an ADR procedure where parties have agreed to submit their dispute to be heard and determined by an appointed arbitrator or a panel of arbitrators. The arbitrators’ decision to resolve the conflict is legally binding on the parties to provide a final outcome. It is also important to note that both a court or arbitral tribunal may provide preliminary relief (also called interim relief) to ensure that the arbitration is an effective forum to resolve the dispute.
Parties are involved in the arbitration process in one of three ways:
- Judicial arbitration — A court may direct parties to participate in non-binding arbitration to reduce the burden of a mounting case backlog. Since the process is non-binding, the parties do not have to give up any legal or constitutional rights to pursue judicial arbitration. If either party is not satisfied with the outcome, they are allowed to file for trial.
- Contractual arbitration — Parties can establish contractual arbitration through an arbitration agreement that is signed before a conflict. In such circumstances, the decision of the arbitrator is final. The arbitrator can decide to either issue an award in favor of the claimant or dismiss the case in favor of the respondent.
The process starts when the person whose legal rights or interests are infringed files a letter of arbitration to the arbitration center/institution identified in the agreement. If ad hoc, the claimant can send the arbitration letter to a respondent, also known as a notice of arbitration or arbitration request.
- Arbitration by stipulation — This process happens when parties agree to arbitration after a dispute emerges and decide on the rules that will govern the process. The decision is binding, and the award is final, subject to court confirmation.
What Is an Arbitration Agreement?
An Arbitration Agreement (available as either a pdf, or Word doc) such as that provided on our website for download is a contract between parties in a defined legal relationship in which they agree to subject present or future dispute that arises to arbitration. The agreement outlines certain arbitration rules, including:
- A location/legal place for the arbitration, which determines the arbitration’s procedural framework. The location is also known as the “seat of administration”;
- The governing law;
- If the arbitration process will ascribe to the rules of a particular institution or if it will be ad hoc.
- The number of arbitrators and the process of selecting them;
- Types of disagreement that the parties will resolve through arbitration;
- The state of confidentiality of the proceedings; and
- The criteria for selecting arbitrators.
An arbitration clause sample or a stand-alone agreement are the primary forms of arbitration agreements.
An arbitration clause can either be binding or non-binding. A binding arbitration clause specifies that the decision of the arbitrator is final. A non-binding arbitration clause specifies that the parties may accept or reject the decision and take the dispute to court.
What does this agreement mean for signatories?
Signed arbitration agreement forms mean that only arbitrators identified in the contract can hear and determine the solution to the conflict. It also means that the parties have relinquished their right to address the matter through the court system.
Why Use an Arbitration Agreement?
Arbitration is generally considered a more efficient, cost-effective dispute resolution process compared to litigation. Here are some of its advantages and shortcomings.
Pros of signing an arbitration agreement
- Less Expensive — Generally, arbitration is quicker and approximately 60% less expensive than litigation. Most arbitration agreements provide a compressed time frame for discovery, trial, and appeal. The same flexibility is not available in court cases.
- Rules of law and evidence — In litigation, a judge will consider the merits of a case in light of standards of evidence, the relevant statutes, and the outcome of former cases that provide precedent. However, in arbitration, arbitrators apply flexible rules of evidence depending on the parties’ agreement and what they consider relevant. Fairness and equity are more necessary in arbitration than the strict application of the law.
- Arbitrator selection — Parties have the opportunity to select the desired arbitrator and can therefore choose one with the relevant industry experience and a history of fairness in their decision-making. The same provisions are not available in court litigation as there is no ability to select a specific judge.
- Preserve relationships — Arbitration processes are usually amicable and less hostile than litigation since the parties may need to work together and come up with an agreeable resolution to the problem.
- Privacy — The issues and outcomes of an arbitration process are confidential and not made available to the public or media.
Cons for employees and consumers
- Unequal bargaining power — Businesses present arbitration clauses on a take-it-or-leave-it basis, especially in employment and consumer-based contracts. Candidates up for employment and consumers have no control or opportunity to bargain on the terms of the clause and may not get the job, or the good or service unless they sign the agreement.
- Inability to appeal — There are limited grounds for appealing an arbitration decision. Some of the grounds for appeal include when a party can prove that there has been corruption, an error of law or the arbitrator has exceeded their powers.
- Low standards of transparency on the arbitrator’s reason for the decision — Unlike in the courts, where rules of procedure require that judges give a written opinion or explanation of the decision made, there is no such requirement in arbitration. The arbitrator only needs to provide a pronunciation of their decision without elaborating on the details or their reasoning. Therefore, employees and consumers may not have a basis for understanding a decision made against their interests.
- Limited discovery — Even though arbitration is cheaper because discovery is limited, there is also a downside. Limited discovery may mean that a party presents their case without sufficient information and facts about the questions at hand.
Sample Arbitration Agreement (Free Word & PDF Files)
Download a sample arbitration agreement pdf to ensure both parties agree on arbitration and there are no issues that might potentially arise later. Arbitration agreement examples help you to draft a document properly.
How to Write an Arbitration Agreement
To write a legally binding arbitration agreement, you need to gather all the variable details of the contract. Once you have this information at hand, fill them out in the form.
Fill in all the necessary information
After downloading an arbitration agreement template doc, ensure you provide the following information for a complete document answer:
- The date on which the agreement is made;
- Details of the two parties, including names and addresses;
- The date on which the parties entered into the contract underlying the arbitration agreement;
- The location of the agreement;
- The governing or applicable law; and
- Attributes of the arbitrator or tribunal.
The parties sign the agreement once all necessary information has been indicated in the arbitration agreement sample.
When you use this Arbitration Agreement pdf, you assume all responsibility and liability. Lawrina retains no legal responsibility for the accuracy, reliability, or functionality of the legal documents.
Any unprofessional use of this legal form or other templates on this website could result in direct or indirect losses or damages. By downloading, printing, or using this agreement, you accept all liability for any loss or damage you may suffer.